Cooler US Weather Forecasts Weigh on Nat-Gas Prices

September Nymex natural gas (NGU26) on Monday closed down -0.043 (-1.57%).

Nat-gas prices fell to a 1-week low on Monday and settled lower as US weather forecasts shifted cooler, potentially reducing demand from electricity providers to power air conditioning.  The Commodity Weather Group said on Monday that the outlook for US weather shifted cooler, with average to below-average temperatures expected across the eastern US from August 22-31. 

As a bearish factor, the US Energy Information Administration (EIA) last Tuesday projected that US nat-gas storage levels will swell to 3,985 bcf at the end of October, the highest level in 10 years and 5% above the five-year average.  US nat-gas inventories are currently +6.7% above their 5-year seasonal average, a sign of robust supplies. 

Nat-gas prices have some negative carryover from August 4, when Energy Transfer announced that the Hugh Brinson pipeline will be able to operate at its full transportation capacity of 1.5 bcf/day by September 1, allowing more gas supplies to flow from the Permian Basin to the US benchmark Henry Hub in Erath, Louisiana, boosting US domestic supplies. 

A bearish medium-term factor for nat-gas prices is speculation that a powerful El Niño weather system will bring warmer-than-normal temperatures to the Northern Hemisphere this fall and winter, reducing nat-gas heating demand. 

US (lower-48) dry gas production on Monday was 114.1 bcf/day (+4.1% y/y), according to BNEF.  Lower-48 state gas demand on Monday was 82.5 bcf/day (+5.1% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Monday were 18.9 bcf/day (+2.3% w/w), according to BNEF.

As a positive factor for gas prices, the Edison Electric Institute reported last Wednesday that US (lower-48) electricity output in the week ended August 8 rose +7.0% y/y to 99,864 GWh (gigawatt hours).  Also, US electricity output in the 52 weeks ending August 8 rose +2.3% y/y to 4,357,109 GWh.

Last Thursday's bearish weekly EIA report showed a +36 bcf increase in US nat-gas inventories for the week ended August 7, larger than market expectations of +31 bcf and the 5-year weekly average of +33 bcf.  As of August 7, nat-gas inventories were down -1.0% y/y and +6.7% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of August 15, gas storage in Europe was 61% full, compared to the 5-year seasonal average of 78% full for this time of year.

Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ended August 14 rose by +4 to 128 rigs, modestly below the 3-year high of 134 rigs set in February 2026.